1996 (6) TMI 318 - HC - VAT and Sales Tax

Summary

Issues: Assessment of turnover tax, liability to pay penal interest, necessity of demand notice for penal interest, applicability of previous judgments on similar cases.

Analysis:
The petitioner, a registered dealer in rubber and latex, was assessed for the assessment year 1988-89 and was required to pay a total tax of Rs. 35,98,943.20, including turnover tax. The petitioner contended that an amount of Rs. 48,535 paid on January 11, 1989, was not considered in the assessment, resulting in a balance due of Rs. 48,534. The assessing authority later demanded penal interest of Rs. 21,764 for not depositing the turnover tax on time. The petitioner challenged this demand through an original petition, arguing that there was no prior demand for payment of tax and that turnover tax was advised to be paid only at the year-end. The petitioner relied on previous judgments to support their case.

The petitioner's counsel argued that the levy of penal interest was unjustified as there was no demand for tax payment and no rule mandating payment of turnover tax before the end of the year. The counsel cited various judgments to support their position. On the other hand, the Government Pleader contended that once the turnover exceeded the limit, the petitioner was liable to pay turnover tax without the need for a demand notice. The Government Pleader also referenced previous judgments to strengthen their argument.

The Court referred to a Full Bench decision which held that the service of a demand notice was not essential for levying penal interest under the Kerala General Sales Tax Act. The liability to pay penal interest arose automatically upon failure to pay the assessed tax within the specified time. The Court distinguished the previous judgments cited by the petitioner, stating that they were not applicable to the current case due to differences in circumstances.

Regarding the liability to pay turnover tax, the Court rejected the petitioner's argument that it only arose at the year-end, citing a previous case where liability attached as soon as the taxable turnover exceeded the prescribed limit. The Court found that the petitioner had admitted the turnover and liability to pay tax, even though a portion of the amount was paid during the year. Consequently, the Court upheld the demand for turnover tax and penal interest, dismissing the original petition challenging the notices.

In conclusion, the Court dismissed the original petition, affirming the liability of the petitioner to pay the turnover tax and penal interest as demanded by the authorities.